Kraken hit with IRS move that cracked Swiss bank secrets in 2008

Website login page featuring Kraken brand colours and logo and US government seal

The US Internal Revenue Service (IRS) has been granted access to Kraken’s crypto exchange data as it seeks to identify US residents behind high-value trades.

Thanks to what the IRS calls a “John Doe” summons, government agents can get their hands on names and contact details of users from a certain tax group, presumably the top end.

A Department of Justice (DoJ) release explains the IRS are forcing Kraken into disclosing anyone who transacted $20,000 or more in crypto between 2016 and 2020.

  • John Doe summonses request info on individuals unknown to the IRS.
  • The IRS used them to crack Swiss bank UBS in 2008.
  • A federal district judge must approve John Does, unlike regular summonses.

The DoJ filed a petition for the data on March 30 “as part of an ongoing and extensive investigation that has seen millions of dollars in unpaid taxes recovered for the Treasury.”

IRS found a way into Kraken via its subsidiaries.

The DoJ release makes it clear the IRS doesn’t suspect San Francisco-based Kraken of any wrongdoing.

The move is part of the government’s drive to ensure that notoriously hard-to-trace cryptocurrencies aren’t used to hide taxable income.

Tax agents’ sights are squarely on “an ascertainable group or class of persons that the IRS has reasonable basis to believe may have failed to comply with internal revenue laws.”

“There is no excuse for taxpayers continuing to fail to report the income earned and taxes due from virtual currency transactions,” said IRS Commissioner Chuck Rettig.

Not just Kraken

Kraken is one of many crypto exchanges subject to similar petitions in recent years. The US government is convinced thousands of taxpayers are not fessing up to their crypto gains.

In 2016, Coinbase was issued a summons for data on over 13,000 customers.

IRS is even scouring the dark web to find NFT tax evaders.

[Read more: Kraken becomes 5th crypto platform to tease IPO after Coinbase]

The Coinbase petition was initially denied on the basis the request was too broad, but was eventually allowed by a California court.

The IRS sent an almost identical request to Boston-based Circle Internet Financial last month, administrator of crypto exchange Poloniex.

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